Question 1

A control would be ineffective _______.

Accepted Answer

A) if it was performed 
B) if it was not performed, or if it failed to function as designed 
C) if it was not performed only 
D) if it failed to function as designed only 
A) if it was performed 
B) if it was not performed, or if it failed to function as designed 
C) if it was not performed only 
D) if it failed to function as designed only

Question 2

The two levels of internal control are _______.

Accepted Answer

A) entity-level controls and transaction-level controls 
B) entity-level controls 
C) transaction-level controls 
D) transaction-level and auditor-level controls 
A) entity-level controls and transaction-level controls 
B) entity-level controls 
C) transaction-level controls 
D) transaction-level and auditor-level controls

Question 3

In preparing a working paper for tests of controls, _______.

Accepted Answer

A) the auditor should defer preparation to the internal audit function 
B) the auditor would ordinarily set out the purpose of the tests of the financial statement accounts identified 
C) the auditor would ordinarily set out the purpose of the tests of the controls identified 
D) the auditor should be careful to avoid bringing to management's attention any defective controls 
A) the auditor should defer preparation to the internal audit function 
B) the auditor would ordinarily set out the purpose of the tests of the financial statement accounts identified 
C) the auditor would ordinarily set out the purpose of the tests of the controls identified 
D) the auditor should be careful to avoid bringing to management's attention any defective controls

Question 4

The greater the amount of difference between tolerable deviation rate and expected deviation rate, _______.

Accepted Answer

A) the larger the sample size 
B) the lower any statistical variance should be 
C) the smaller the sample size. 
D) the smaller the population being sampled should be 
A) the larger the sample size 
B) the lower any statistical variance should be 
C) the smaller the sample size. 
D) the smaller the population being sampled should be

Question 5

The assurance that the _______ is not exceeded by the actual rate of deviation is influenced by the degree to which the auditor intends to rely on the control as a basis for limiting substantive tests or for supporting an opinion on internal control over financial reporting (ICFR).

Accepted Answer

A) tolerable rate of deviation 
B) expected rate of deviation in the population 
C) desired level of assurance 
D) control exception 
A) tolerable rate of deviation 
B) expected rate of deviation in the population 
C) desired level of assurance 
D) control exception

Question 6

When an auditor asks management how it makes sure the reconciliation is prepared correctly and on a timely basis, this is an example of _______.

Accepted Answer

A) inquiry 
B) interrogation 
C) audit scanning techniques 
D) professional skepticism 
A) inquiry 
B) interrogation 
C) audit scanning techniques 
D) professional skepticism

Question 7

Which of the following should be done by the auditor if tests of controls indicate that a key control is not functioning as designed?

Accepted Answer

A) Increase the assessed level of control risk 
B) Increase the level of assessed detection risk 
C) Stabilize the nature, timing, and extent of substantive tests related to the assertion 
D) Rely on external controls 
A) Increase the assessed level of control risk 
B) Increase the level of assessed detection risk 
C) Stabilize the nature, timing, and extent of substantive tests related to the assertion 
D) Rely on external controls

Question 8

Prevention controls _______.

Accepted Answer

A) should always have physical evidence indicating whether the control was performed 
B) will rarely have physical evidence indicating whether the control was performed 
C) do not always have physical evidence indicating whether the control was performed 
D) are the same as detect controls 
A) should always have physical evidence indicating whether the control was performed 
B) will rarely have physical evidence indicating whether the control was performed 
C) do not always have physical evidence indicating whether the control was performed 
D) are the same as detect controls

Question 9

Which of the following is true of working papers?

Accepted Answer

A) Working papers document the auditors' conclusion about control risk and the basis for that conclusion. 
B) Working papers are necessary for the junior auditor to keep track of the daily work, but are not important to the overall audit. 
C) Working papers document the results of the tests but not the purpose of the control selected for testing. 
D) Working papers document the purpose of the control selected for testing and the conclusion made by the auditor, but not the results of the test. 
A) Working papers document the auditors' conclusion about control risk and the basis for that conclusion. 
B) Working papers are necessary for the junior auditor to keep track of the daily work, but are not important to the overall audit. 
C) Working papers document the results of the tests but not the purpose of the control selected for testing. 
D) Working papers document the purpose of the control selected for testing and the conclusion made by the auditor, but not the results of the test.

Question 10

When testing controls, _______.

Accepted Answer

A) the auditor must be alert for evidence that the control might be effective, even if only once or twice 
B) the auditor must be alert for evidence that the control might be ineffective, even if only once or twice 
C) the auditor should delegate audit procedures to the internal auditors where possible 
D) it is possible for the auditor to rely on the opinion of the prior auditor 
A) the auditor must be alert for evidence that the control might be effective, even if only once or twice 
B) the auditor must be alert for evidence that the control might be ineffective, even if only once or twice 
C) the auditor should delegate audit procedures to the internal auditors where possible 
D) it is possible for the auditor to rely on the opinion of the prior auditor

Question 11

An auditor watching an employee prepare a bank reconciliation would be an example of _______.

Accepted Answer

A) observation 
B) professional skepticism 
C) recalculation 
D) inquiry 
A) observation 
B) professional skepticism 
C) recalculation 
D) inquiry

Question 12

With respect to audit sampling, _______.

Accepted Answer

A) there is no relationship between assurance and sample size 
B) there is a direct relationship between assurance and sample size 
C) the choice of which accounts to sample should be as non-random as possible 
D) the auditors should ideally select a sample size which is larger than the population 
A) there is no relationship between assurance and sample size 
B) there is a direct relationship between assurance and sample size 
C) the choice of which accounts to sample should be as non-random as possible 
D) the auditors should ideally select a sample size which is larger than the population

Question 13

If a client has strong entity-level controls, _______.

Accepted Answer

A) it is less likely that transaction-level controls will operate effectively 
B) it is more likely that transaction-level controls will operate effectively 
C) it is likely that the client has an ineffective audit committee 
D) it is likely that the client has a higher assessed level of inherent risk 
A) it is less likely that transaction-level controls will operate effectively 
B) it is more likely that transaction-level controls will operate effectively 
C) it is likely that the client has an ineffective audit committee 
D) it is likely that the client has a higher assessed level of inherent risk

Question 14

Strong entity-level controls _______.

Accepted Answer

A) make it less likely that transaction-level controls will operate effectively 
B) make it more likely that transaction-level controls will operate effectively 
C) generally increase inherent risk 
D) have no bearing on inherent risk 
A) make it less likely that transaction-level controls will operate effectively 
B) make it more likely that transaction-level controls will operate effectively 
C) generally increase inherent risk 
D) have no bearing on inherent risk

Question 15

In inquiry, the auditor is not allowed to ask the employee who prepares the bank reconciliation how reconciling items are identified and the reasons for them.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following best defines detection controls?

Accepted Answer

A) Controls that are applied after transactions have been processed to identify whether fraud or errors have occurred, and to rectify the fraud or errors on a timely basis 
B) The collective assessment of the client's control environment, risk assessment process, information system, control activities and monitoring of controls 
C) Controls that affect a particular transaction cycle or group of transactions 
D) Controls that determine the flow of documents through the system 
A) Controls that are applied after transactions have been processed to identify whether fraud or errors have occurred, and to rectify the fraud or errors on a timely basis 
B) The collective assessment of the client's control environment, risk assessment process, information system, control activities and monitoring of controls 
C) Controls that affect a particular transaction cycle or group of transactions 
D) Controls that determine the flow of documents through the system

Question 17

Detection controls vary _______.

Accepted Answer

A) from year-to-year with the same client 
B) from client to client to a greater extent than prevention controls 
C) from client to client to a lesser extent than prevention controls 
D) depending on managements desire to override controls 
A) from year-to-year with the same client 
B) from client to client to a greater extent than prevention controls 
C) from client to client to a lesser extent than prevention controls 
D) depending on managements desire to override controls

Question 18

_______ are controls that do not rely on the client's information technology (IT) environment for their operation.
[Manual controls] | Automated controls | IT general controls (ITGCs) | Computer application controls

Accepted Answer

The answer of _______ are controls that do not rely...

Question 19

Absence of effective prevention controls _______.

Accepted Answer

A) decreases the risk that errors or fraud may occur 
B) increases the risk that errors or fraud may occur 
C) decreases the overall risk of the audit 
D) has no bearing on the risk of the audit 
A) decreases the risk that errors or fraud may occur 
B) increases the risk that errors or fraud may occur 
C) decreases the overall risk of the audit 
D) has no bearing on the risk of the audit

Question 20

Define expected rate of deviation.

Accepted Answer

A) It is the rate at which the auditor expects controls to not function as planned. 
B) It is the maximum rate of deviation from a prescribed control that an auditor is willing to accept. 
C) It is the rate that represents the confidence that the evidence obtained is representative of the underlying population from which the sample was taken. 
D) It is similar to the actual rate of deviation in the population. 
A) It is the rate at which the auditor expects controls to not function as planned. 
B) It is the maximum rate of deviation from a prescribed control that an auditor is willing to accept. 
C) It is the rate that represents the confidence that the evidence obtained is representative of the underlying population from which the sample was taken. 
D) It is similar to the actual rate of deviation in the population.

A control would be ineffective _______.

The two levels of internal control are _______.

In preparing a working paper for tests of controls, _______.

The greater the amount of difference between tolerable deviation rate and expected deviation rate, _______.

The assurance that the _______ is not exceeded by the actual rate of deviation is influenced by the degree to which the auditor intends to rely on the control as a basis for limiting substantive tests or for supporting an opinion on internal control over financial reporting (ICFR).

When an auditor asks management how it makes sure the reconciliation is prepared correctly and on a timely basis, this is an example of _______.

Which of the following should be done by the auditor if tests of controls indicate that a key control is not functioning as designed?

Prevention controls _______.

Which of the following is true of working papers?

When testing controls, _______.

An auditor watching an employee prepare a bank reconciliation would be an example of _______.

With respect to audit sampling, _______.

If a client has strong entity-level controls, _______.

Strong entity-level controls _______.

In inquiry, the auditor is not allowed to ask the employee who prepares the bank reconciliation how reconciling items are identified and the reasons for them.

Which of the following best defines detection controls?

Detection controls vary _______.

_______ are controls that do not rely on the client's information technology (IT) environment for their operation. [Manual controls] | Automated controls | IT general controls (ITGCs) | Computer application controls

Absence of effective prevention controls _______.

Define expected rate of deviation.

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing the Purchases Cycle and Payroll Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters

Exam 8: Risk Responseperforming Tests of Controls

A control would be ineffective _______.

The two levels of internal control are _______.

In preparing a working paper for tests of controls, _______.

The greater the amount of difference between tolerable deviation rate and expected deviation rate, _______.

The assurance that the _______ is not exceeded by the actual rate of deviation is influenced by the degree to which the auditor intends to rely on the control as a basis for limiting substantive tests or for supporting an opinion on internal control over financial reporting (ICFR).

When an auditor asks management how it makes sure the reconciliation is prepared correctly and on a timely basis, this is an example of _______.

Which of the following should be done by the auditor if tests of controls indicate that a key control is not functioning as designed?

Prevention controls _______.

Which of the following is true of working papers?

When testing controls, _______.

An auditor watching an employee prepare a bank reconciliation would be an example of _______.

With respect to audit sampling, _______.

If a client has strong entity-level controls, _______.

Strong entity-level controls _______.

In inquiry, the auditor is not allowed to ask the employee who prepares the bank reconciliation how reconciling items are identified and the reasons for them.

Which of the following best defines detection controls?

Detection controls vary _______.

_______ are controls that do not rely on the client's information technology (IT) environment for their operation. [Manual controls] | Automated controls | IT general controls (ITGCs) | Computer application controls

Absence of effective prevention controls _______.

Define expected rate of deviation.

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing the Purchases Cycle and Payroll Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters